EUROPEAN INFLATION: MNI Eurozone Inflation Insight – May 2025
We've just published our review of the May Eurozone flash inflation round - DOWNLOAD FULL REPORT HERE
Services Y/Y Falls To 3-Year Low
- Eurozone May flash HICP headline and core both printed 0.1pp below consensus expectations, at 1.9% and 2.3%, respectively. Services inflation saw a more meaningful 0.2pp ‘miss’ at 3.2% Y/Y, materially below April’s 4.0% for the lowest reading since March 2022.
- The deceleration seems to have been underpinned by an “Easter Effect” unwind but a medium-term view on the ECB’s seasonally adjusted data suggests that some underlying softening was also likely at play.
- Across the main countries, lower-than-expected readings were observed in France (0.6% Y/Y vs 0.9% cons), Spain (1.9% vs 2.0% cons), and notably the Netherlands (3.0% vs 3.8% cons), while Italy printed inline (1.9% vs 1.9% cons) and Germany was slightly firmer than expected (2.1% vs 2.0% cons). The drag on euro area inflation from the Netherlands was of particular note, as it looks to have contributed significantly to the below-expected EZ reading.
- The inflation data kept market expectations firmly for a 25bp cut at the upcoming June ECB meeting – see our full preview of the decision here.
- MNI published a sources story on May 30 highlighting that the upcoming ECB June meeting is set to see a lower inflation forecast for 2026, from 1.9% in March’s projections to 1.7% or 1.8% in the updated round. “Despite this downward revision, this deviation below 2% will not be considered strong enough to automatically trigger an additional rate cut beyond the June meeting, as some of the drivers of this inflation revision could reverse course given uncertainty over international trade”, the sources piece read (link).
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
